The Lawfare Podcast: Lawfare Archive—Weaponizing the Dollar with Saleha Mohsin

Release Date: April 5, 2025

Introduction

In this episode of The Lawfare Podcast, Carolyn Cornett moderates a comprehensive discussion with Saleha Mohsin, the author of Paper Soldiers: How the Weaponization of the Dollar Changed the World Order. The conversation delves into the intricate role of the U.S. dollar in global economics and national security, exploring its historical foundations, strategic weaponization through sanctions, and the contemporary challenges posed by de-dollarization efforts.

Background and Context

Saleha Mohsin's book provides an in-depth analysis of the U.S. dollar's evolution from a post-World War II cornerstone of the global economy to a strategic tool utilized by policymakers to exert economic and political influence. Her work spans decades, highlighting pivotal moments that have shaped the current monetary landscape.

Historical Foundations of the U.S. Dollar

Mohsin elucidates the deliberate strategies employed by the United States to establish the dollar as the premier global reserve currency. Reflecting on the Bretton Woods Conference of 1944, she explains how the U.S. capitalized on its economic might and the weakened state of Great Britain to assume leadership in the post-war economic order.

"The U.S. successfully positioned the dollar as the world's reserve currency, not by accident but through intentional policy decisions that leveraged its economic strength."
— Saleha Mohsin [08:56]

She further discusses the transition from the gold-backed dollar to a fiat currency during the Nixon administration, a move driven by the necessity to combat inflation and maintain economic credibility.

"Dropping the gold peg wasn't just a monetary decision; it was about safeguarding the dollar's strength by prioritizing economic stability over rigid adherence to gold reserves."
— Saleha Mohsin [13:33]

Weaponizing the Dollar through Sanctions

A significant portion of the discussion centers on how the U.S. has utilized the dollar's dominance to implement economic sanctions as a non-kinetic tool of national security. Post-9/11, the Treasury Department expanded its sanctions capabilities to disrupt terrorist financing, marking the beginning of the dollar's weaponization.

"Sanctions became the new battlefield, where economic pressure could substitute for traditional military intervention, leveraging the dollar's ubiquity to isolate adversaries."
— Saleha Mohsin [34:38]

Mohsin highlights the strategic foresight of policymakers like Jack Lew, who warned against the overuse of sanctions, fearing that excessive reliance could provoke de-dollarization efforts by adversaries.

"Jack Lew foresaw that relentless sanctioning could lead other nations to distance themselves from the dollar, undermining its very dominance."
— Saleha Mohsin [39:31]

Impact of Strong Dollar Policy

The conversation explores the dual-edged nature of a strong dollar. Domestically, it benefits consumers through cheaper imports and lower inflation but adversely affects the manufacturing sector by making exports less competitive. Mohsin illustrates this with real-world examples from the Rust Belt, where globalization and a strong dollar led to factory closures and economic decline.

"A strong dollar supports global trade by making imports cheaper, yet it simultaneously erodes the competitiveness of American manufacturers, leading to job losses and economic hardship in industrial regions."
— Saleha Mohsin [22:05]

U.S.-China Economic Relations and Currency Manipulation

A critical aspect of the discourse addresses the intricate economic interplay between the United States and China. Mohsin describes the competitive and contentious relationship, particularly focusing on accusations of currency manipulation by China to maintain export advantages.

"China's currency policies have created an uneven playing field, making it cheaper for Americans to buy Chinese goods while disadvantaging domestic manufacturers."
— Saleha Mohsin [28:46]

She notes that despite international agreements meant to curb such practices, the deeply entrenched economic strategies make it challenging to achieve meaningful change. The Trump administration's aggressive stance on China-marked the escalation of these economic tensions.

"The Trump administration's aggressive sanctions against China were a direct challenge to decades of established economic practices, highlighting the vulnerabilities of the dollar's dominance."
— Saleha Mohsin [28:46]

Sanctions Under the Trump Administration

The episode delves into specific instances of dollar weaponization during the Trump era, including the high-stakes sanctions against Russian oligarchs like Oleg Deripaska. Mohsin recounts how these actions had profound ripple effects across global commodity markets, yet also exposed the limits of sanctions when dealing with deeply integrated economic entities.

"Sanctioning a major player like Deripaska sent shockwaves through global markets, demonstrating both the power and the precariousness of using the dollar as a weapon."
— Saleha Mohsin [45:14]

February 2022: A Pivotal Moment for the Dollar

Mohsin brings the discussion to a contemporary crossroad, referencing the unprecedented sanctions imposed on Russia in February 2022 amid its invasion of Ukraine. This massive sanctions package, supported by Western allies, aimed to sever Russia's access to the global financial system, signaling a potential turning point in the dollar's unrivaled supremacy.

"February 26, 2022, could be remembered as the moment when the dollar's empire faced its most significant challenge through extensive sanctions against a major global economy."
— Saleha Mohsin [51:10]

Despite fears of sparking de-dollarization, Mohsin concludes on an optimistic note, arguing that the dollar's strength is intrinsically tied to the robustness of the U.S. economy and its democratic institutions.

"As long as the United States remains strong and united, the dollar will retain its dominant position, regardless of other nations' attempts to undermine it."
— Saleha Mohsin [51:10]

Conclusions and Future Outlook

The episode wraps up with a reflection on the inseparable link between the dollar's power and America's democratic resilience. Mohsin emphasizes that safeguarding the dollar's status requires maintaining economic strength, political stability, and institutional integrity.

"Protecting the dollar is fundamentally about protecting the strength and unity of the United States itself."
— Saleha Mohsin [51:10]

She believes that while economic strategies like sanctions wield significant influence, the ultimate determinant of the dollar's fate lies in the continual fortification of America's economic and democratic foundations.

Key Takeaways

1. Strategic Currency Policy: The U.S. has historically leveraged the dollar to shape global economic policies and exert influence through mechanisms like sanctions.
2. Dual Impact of a Strong Dollar: While beneficial for consumers and global trade, a strong dollar poses challenges for domestic manufacturing and economic sectors.
3. U.S.-China Economic Tensions: Accusations of currency manipulation by China illustrate the complexities of maintaining dollar dominance amidst competitive global economies.
4. Weaponization through Sanctions: The use of the dollar to impose sanctions has become a central tool in U.S. foreign policy, with significant geopolitical and economic ramifications.
5. Resilience of the Dollar: The dollar's continued dominance is contingent upon the enduring strength and unity of the United States, emphasizing the importance of robust economic and democratic institutions.

Notable Quotes

• "Sanctions became the new battlefield, where economic pressure could substitute for traditional military intervention, leveraging the dollar's ubiquity to isolate adversaries." — Saleha Mohsin [34:38]
• "China's currency policies have created an uneven playing field, making it cheaper for Americans to buy Chinese goods while disadvantaging domestic manufacturers." — Saleha Mohsin [28:46]
• "A strong dollar supports global trade by making imports cheaper, yet it simultaneously erodes the competitiveness of American manufacturers, leading to job losses and economic hardship in industrial regions." — Saleha Mohsin [22:05]
• "As long as the United States remains strong and united, the dollar will retain its dominant position, regardless of other nations' attempts to undermine it." — Saleha Mohsin [51:10]

Conclusion

This episode of The Lawfare Podcast offers a profound exploration of the U.S. dollar's pivotal role in shaping both global and domestic landscapes. Saleha Mohsin's insights illuminate the delicate balance between leveraging economic power for national security and mitigating the adverse effects on the American economy. As the global financial order continues to evolve, the strength and resilience of the United States remain the cornerstone of the dollar's enduring supremacy.